Over-contributed to IRA , now what?

Financial Planning - Financial planning in general. (Moderated) 

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Subject Author Date Over-contributed to IRA , now what? oprah.chopra 10-29-2007  Re: Over-contributed to IRA , now what? Mark Bole 10-29-2007  Re: Over-contributed to IRA , now what? Justin 10-30-2007
Posted by on October 29, 2007, 2:25 pm I opened a ROTH and traditional IRA a few years ago when my yearly income was around 60k. I put 3k/year in them. Now my yearly income has doubled, but I never changed my contributions. I have around 18k in the IRA's. I have stopped putting any more money in them, but how do I go about calculating how to fix this mess? Seems like such a nuisance since you can hardly contribute much to these IRA's and then they have all these complex rules on how much you can contribute based on your income... Posted by Mark Bole on October 29, 2007, 2:41 pm oprah.chopra@gmail.com wrote: > I opened a ROTH and traditional IRA a few years ago when my yearly > income was around 60k. I put 3k/year in them. Now my yearly income > has doubled, but I never changed my contributions. I have around 18k > in the IRA's. I have stopped putting any more money in them, but how > do I go about calculating how to fix this mess? > > Seems like such a nuisance since you can hardly contribute much to > these IRA's and then they have all these complex rules on how much > you can contribute based on your income... This is primarily a tax question. Without looking it up, I recall there is a 6% per year penalty on the excess contributions to the Roth IRA until you take them back out. You will also probably have to pay regular income tax on earnings, if any, due to the excess amount. Contributions to the traditional IRA, assuming you didn't exceed the annual maximum per person, will not be penalized but will simply be considered non-deductible, once you amend your prior year's returns to remove any deduction you claimed and pay the extra tax and interest/penalties on same. I recommend you contact a tax professional well before the end of the year and then the custodian of your account. A small piece of good news is that while there is a federal penalty, at least one state (CA) does not have a penalty on excess contributions. -Mark Bole Posted by Justin on October 30, 2007, 1:02 pm oprah.chopra@gmail.com wrote on [Mon, 29 Oct 2007 13:25:24 -0500]: > I opened a ROTH and traditional IRA a few years ago when my yearly > income was around 60k. I put 3k/year in them. Now my yearly income > has doubled, but I never changed my contributions. I have around 18k > in the IRA's. I have stopped putting any more money in them, but how > do I go about calculating how to fix this mess? > > Seems like such a nuisance since you can hardly contribute much to > these IRA's and then they have all these complex rules on how much > you can contribute based on your income... Ummm, you put 3K a year into each of them, for 6K total? The maximum you can put into an IRA per year is a total of all IRA types. So, if the annual max is 3K, it's 3K total, adding up traditional and Roth. Similar Threads Posted HELP! - I overcontributed 4k in 2005 and 2006 to both a Trad IRA and newly opened Roth IRA March 5, 2007, 8:18 am